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Oil Producer Report: “Sentiment Pendulum” swings for oil

By Oil Producer Report

Brent has been stuck in a compressed $60-63/bbl range since its rally from the late December abyss, historically a reliable indicator that a pop in volatility awaits.
The narrow range is counterintuitive given the multitude of macro and oil-specific variables. However, consumers are buyers at $60/bbl Brent, while a wall of producer selling sits above, putting a floor and cap on prices.
Producers are lined-up and view a potential bounce in oil prices as an opportunity to sell. The queue grows with every passing week. Nothing short of a substantial catalyst is needed for Brent to break to the key technical level of $71.5 – $72.5/bbl. A foreign policy mis-step aimed at swapping Iranian for Venezuelan barrels could be just the failed outcome needed as a catalyst …
The supply side narrative remains constructive, while consensus demand growth expectations for 2019 remain, in our view, completely unrealistic. That being said, the usual barrel-counting feels absurd to us. The market seems to be sleepwalking while there are major game-changers developing given geopolitics and macro-economic stresses ahead.

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Oil Producer Report: Why is Brent not higher ?

By Oil Producer Report

Brent has been stuck in a compressed $60-63/bbl range since its rally from the late December abyss, historically a reliable indicator that a pop in volatility awaits.
The narrow range is counterintuitive given the multitude of macro and oil-specific variables. However, consumers are buyers at $60/bbl Brent, while a wall of producer selling sits above, putting a floor and cap on prices.
Producers are lined-up and view a potential bounce in oil prices as an opportunity to sell. The queue grows with every passing week. Nothing short of a substantial catalyst is needed for Brent to break to the key technical level of $71.5 – $72.5/bbl. A foreign policy mis-step aimed at swapping Iranian for Venezuelan barrels could be just the failed outcome needed as a catalyst …
The supply side narrative remains constructive, while consensus demand growth expectations for 2019 remain, in our view, completely unrealistic. That being said, the usual barrel-counting feels absurd to us. The market seems to be sleepwalking while there are major game-changers developing given geopolitics and macro-economic stresses ahead.

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Crude Oil Trading Report: Growing producer queue to hedge

By Oil Producer Report

Brent has been stuck in a compressed $60-63/bbl range since its rally from the late December abyss, historically a reliable indicator that a pop in volatility awaits.
The narrow range is counterintuitive given the multitude of macro and oil-specific variables. However, consumers are buyers at $60/bbl Brent, while a wall of producer selling sits above, putting a floor and cap on prices.
Producers are lined-up and view a potential bounce in oil prices as an opportunity to sell. The queue grows with every passing week. Nothing short of a substantial catalyst is needed for Brent to break to the key technical level of $71.5 – $72.5/bbl. A foreign policy mis-step aimed at swapping Iranian for Venezuelan barrels could be just the failed outcome needed as a catalyst …
The supply side narrative remains constructive, while consensus demand growth expectations for 2019 remain, in our view, completely unrealistic. That being said, the usual barrel-counting feels absurd to us. The market seems to be sleepwalking while there are major game-changers developing given geopolitics and macro-economic stresses ahead.

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Crude Oil Trading Report: $50/bbl Brent, where to from here?

By Oil Producer Report

2018 saw a brutal swing in sentiment that has left the oil market with a nasty hang over into year-end.
The latest move lower has sparked industry concern, however, sentiment remains surprisingly bullish and the start of 2019 will be critical to set the tone.
Few major market participants have been left unscathed by the uptick in oil price volatility. Oil producers are hedged but well below year ago levels; market makers such as banks, were hit by “negative gamma” as oil prices crossed through put strikes subsequently sold to producers; Investors were caught off guard by the magnitude and the swiftness of the sell-off in prices and spike in volatility; while trade houses suffered from a lack of trading opportunities outside of physical arbs in the US. Overall, 2018 was a year to forget for most in the oil market.
Where to from here and what are the signals we are monitoring for oil producers in 2019?

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Crude Oil Trading Report: Exactly what OPEC+ doesn’t want

By Oil Producer Report

We can send our thanks to President Trump for triggering the recent round trip to $86 bbl and back to $70/bbl. Increased production from OPEC+ to offset “Iran exports to zero”, a last minute policy shift on waivers for Iran barrels and “verbal management” lower has had its toll on the oil market.
Mid-term elections are over, with “the job now done”, leaving OPEC+ on the back foot to manage damage control ahead of the 6th Dec OPEC meeting in Vienna.
Looking at the shift in the oil forward curve, it is no wonder Saudi Arabia is trying to contain the situation by raising OSP’s to the US (the most visible barrels) and by announcing a 500 kbd cut for December. OPEC+ producers are selling into a contango spot market, whilst (commercial) independent oil producers can hedge ~$70 bbl.
This is exactly what OPEC+ doesn’t want !
*For detailed analysis on CTC’s Brent-linked hedging portfolio survey, please contact us.

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